The report described the results of the “Virtual Markets Integrity Initiative” launched in April earlier this year, after the Attorney General named ‘Eric T. Schneiderman’ sent letters to 13 different digital exchanges, requesting brief info on their operations, internal controls and other key problems.
The move was taken so as to clear average investors vision with a much better understanding of the related risks and protections revolving around the crypto trading platforms, moreover additionally to increase the transparency barrier.
The recent report examines the practices of around 10 crypto trading platforms primarily based within the U.S. and abroad, additionally along with collecting data by the Attorney General’s workplace regarding the state of digital currency markets as a whole.
The study revealed that the absence of accepted strategies for auditing virtual assets leads to a uniform and transparent approach to independent auditing digital currency listed on exchanges. This puts customers’ funds stored onto their exchange accounts in danger of attacks from hackers or thieving. The report afterwards queries the problem of public protection and therefore the sufficiency of the business insurance to hide potential losses.
The report additional outlines abusive trading practices, focusing that the majority of crypto trading platforms deploy automatic traders, providing them special conditions, that leaves retail customers at an obstacle. It conjointly states that digital currency exchanges involve varied, overlapping lines of business that represent serious conflicts of interest. The report further explains:
“Automated trading activities may conjointly enable one trader or cluster of traders to command multiple accounts at the same time to obscure coordinated trading, so as to manipulate costs.”
The report notes, that many of the investigated platforms trade their own account in volumes that conjure a big portion of total trading. Many enable their workers to trade on their venue, that raises doubts regarding exchanges’ efforts to make sure workers don’t use personal information to get a bonus over alternative traders. However, a number of the platforms issue their own crypto currencies or settle for compensation in exchange for listing a virtual asset to trade.
The report additionally reads:
“Though some virtual currency platforms have taken steps to police the fairness of their platforms and safeguard the integrity of their exchange while there are still several left who haven’t. Platforms lack sturdy period and historical market inspection capabilities, like those found in ancient trading venues, to spot and stop suspicious trading patterns.”